The USA Online Gambling Laws and Their Impact on Other Jurisdictions

There has been feverish talk in the press recently as to the possible effects that the recent criminalisation of online gambling in the USA will have on the British market. Many have suggested that the UK government will follow suit, resulting in a prohibition on the activity within British borders, while others argue that this is, in fact, too good an opportunity for the UK government to pass up. It is argued by these individuals that, if the UK were to begin attracting American gamblers who now have nowhere else to go, the financial gains available to the Exchequer would be too great a temptation.

Online gambling is one of the fastest-growing sectors of the service industry in Britain. One need only look at Betfair, one of the market leaders, for evidence of this; last year the company recorded year-end profits of $44 million, off the back of a sports book which was only established in 2000. Similarly, the taxation of online gambling is one of the most easily available sources of revenue for the Exchequer; it is a seemingly never-ending stream of money which can be very easily taxed, particularly bearing in mind the general public antipathy towards gambling. It is this very concern as to 'social cost' of the activity, rather than the potential financial gain that it represents, that makes regulation and taxation politically possible.

It is the same antipathy which informs the growing opposition to the government's legalisation of online gaming. It is thought in many quarters that the social cost far outweighs the social benefits and, as such, there are fears that the actions of the American government could pave the way for the outlawing of online gambling in the UK. However this seems unlikely; the British government has already expended large amounts of time and money establishing licensing laws around online gambling. Indeed, the government is now actively soliciting for business from companies who are to be exiled from the US, in a similar fashion to that seen in Antigua, whose government is offering to licence US gaming sites - albeit, of course, at a price.

The British government has a liberal history as far as online gambling goes, as illustrated by their actions with regard to the EU. As members of a common market, EU member states are obliged to accept goods and services (including the provision of online gaming) from all other member states, without prejudice. When a special exemption was made for online gambling, several member states sought to outlaw the practice. Britain, however, along with states such as Denmark, preferred to legislate and regulate, as a result of their belief that people would find a way of gaming regardless of its legality - the state might as well, therefore, try to make some money out of it.

It is for precisely these fiscal reasons that it seems almost certain that the process of legalisation and regulation of the online gambling industry will continue apace in Britain. The importance of the sector to the Exchequer is too high; paradoxically, in fact, the outlawing of the activity in the USA should cement this position.

Indeed, it is likely that we will see an even more markedly rapid growth in the sector as American gamblers look for a similar, but legal, gaming experience. This will have positive effects for the British gambling community; increased demand will mean an increase in the number and quality of services available. Similarly, on a more basic level, the more players taking part in a game, the higher the jackpots will be, or the more competitive the odds available. This can only be a good thing for players.